China is rising. Will the China era come? What does an awakening Giant mean for the rest of the world? This blog will focus on these questions and introduce current economic events and politic news of China.

Sunday, August 14, 2005

Aug. 14--You can get a glimpse of how the just-in-time global economy has evolved by tracing the trip of more than 7,000 miles an Apple iPod took from Shanghai, China, where it was manufactured, to Pittsburgh.

In contrast to the 90 days it took a cargo-laden clipper ship to travel from Shanghai to New York 150 years ago, consumer products such as an iPod can now make it from the factory dock in China to a home address in Pittsburgh in just a few days.

"This is lean manufacturing, just-in-time-delivery and supply chain (management) in action. It's globalization at work, where the production moves to the countries that cost the least" and the products end up at customers' doorsteps in a matter of days, not weeks or months, said Satish Jindel, president of Sewickley-based SJ Consulting Group Inc., a transportation and logistics consulting and design business.

Apple sold 6.16 million iPods in the just-ended fiscal third quarter, a whopping 616 percent increase from the 860,000 sold in the same three months a year earlier. They were distributed through a mix of company-owned Apple brand stores, third-party retailers such as Circuit City and Best Buy and over the Internet.

Bitten by the iPod bug, I ordered the music player online through Apple's Internet store on a Sunday afternoon, enticed in part by the promise of free shipping and not having to leave the house to shop. I passed on the express option to save the additional fee.

By the next morning, there was a flurry of e-mails acknowledging the order and informing me that the iPod had been shipped via FedEx. It showed up on my doorstep by 9:15 a.m. Thursday -- never having been in a store in the United States or in a warehouse other than FedEx shipping depots.

Why so fast? Jindel said the quick turnaround is important because of three converging factors: the iPod is a relatively high value product that is low in weight and has the potential of quickly becoming obsolescent. In other words, what's new now may be old in a few months, making speedy delivery critical.

"This (electronics) industry changes so fast. The iPod you buy today is different from the one you bought six months ago," Jindel said. "You can't have inventory in stock. You don't want to sell an older product."

Even though I knew the iPod, like many other consumer products, was made in China, I had erroneously assumed it would be shipped to Pittsburgh from a U.S. warehouse, perhaps in California where Apple is based.

To find out, I logged onto the FedEx tracking site on Monday and saw that the iPod spent its first shipment day at a "local FedEx facility" in Shanghai, where Inventec Appliances -- Apple's contract manufacturer there -- has a factory.

It took another day or so to move to a large FedEx hub in Shanghai that supports 23 weekly flights between China and the United States. FedEx has won approval from the U.S. Department of Transportation to add three more flights next year.

From Shanghai, the iPod moved to Anchorage, Alaska, where FedEx operates a 1,200- employee hub that has become a gateway for exported products leaving China for the United States. In the same overnight jaunt, the iPod went to another U.S. hub in Indianapolis, and then to Pittsburgh.

Jindel said the quick trip is a testament to the reliability of an international transportation network that has developed over the last few years by such large shipping companies as FedEx, UPS and DHL.

"If you were to fly, it probably would have taken you longer," said Jindel. "You would have missed a flight or you would have been rescheduled."

China, which shipped $342.3 billion worth of electronics, toys and textiles and other products overseas in the first half of this year, is becoming such an important market for FedEx Express that in July it announced it was building a $150 million Asia Pacific hub at the Guangzhou Baiyun International Airport in southern China. It also announced direct flights to Europe in March.

FedEx ships the iPod through a program it calls International Priority Direct Distribution, which allows a shipper to send multiple pieces from a single location, such as China, to multiple recipients in the receiving country.

The benefits to the customer are a streamlined shipping process, reduced transit times and the ability of customers to track their packages through FedEx's computer system.

An Internet search brings up a raft of comments from new iPod buyers who anxiously track their new gadgets as they travel from Shanghai to the United States. More than 3 million electronic tracking requests for packages are made by FedEx customers every day.

"There are a lot of obsessed people out there," Allison Sobczak, a spokeswoman for Moon-based FedEx Ground, said after reviewing Internet blogs about the iPod's international travels. "It's really what customers want. Customers want package information."

Hal Walker, an advertising executive for Ketchum in New York, counts himself among the obsessed package trackers. He uses Internet tracking systems by various shippers to follow computers and other purchases, mostly so he can get home from work in time to receive them.

But there's pleasure in the chase, too. "I always imagine the secret life of these packages and how they wind up in different places than they would never imagine," Walker said. "I always feel comfortable when they are sort of near me."

Key to all this tracking is the bar code. FedEx scans the bar codes on domestic ground packages 10 to 12 times from the point of pickup to end delivery. The number of scans is as high as 23 on international packages.

Apple declined to comment for this story. But it seems clear that the company and its contract manufactures are emulating lean manufacturing techniques made famous by Toyota, the Japanese car company envied for its quality and cost advantages, and by Dell Inc.

The Austin, Texas-based computer maker is admired for its ability to build a high volume of competitively priced customized computers in response to individual orders placed through catalogs, the Internet and over the telephone. No computer is built until payment is received.

"They (Dell) don't incur any expenses until after the order is placed and you come up with the money, which is definitely not in most business models," Jindel said.

Typically a lean manufacturer such as Apple contractor Inventec would set up operations so that products are built in a matter of hours from the time an order is received, said Mark Sewell, managing director of productivity improvement services at Catalyst Connection, a private nonprofit regional economic development organization in Pittsburgh.

That means everything from the ordering to manufacturing and shipping had to be streamlined with unnecessary steps and waiting taken from the process at every possible turn.

"It's a matter of looking at the steps that used to take days or weeks and getting it down to hours or even minutes," Sewell said.

Meanwhile, my new iPod's four-day journey from the time the order was placed ended with the arrival of a beautifully packaged small box that contained everything I need.

Now if I could only figure out how to operate it.

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